Does Anyone Still Rent?

[geronimo]

I's suspect that a property investor, who has IPs but no PPoR, should investigate having a PPoR at some stage- especially if it's a property which may be sold at a good profit.

The CGT exemption on the sale of the property would make it well worth while the higher payments for 12 months while living in that property.

I can say that- in Canberra, rental yields are better, so renting is not completely attractive.

Hi Geoff

I totally agree, in terms of property trading, it is a waste not to take advantage of the CGT exemption on PPOR.

Whether someone 'actually' lives there is another story. Best of both worlds really and if you're buying and selling a PPOR a year.

Brendon
--------------------------------------
Acute Mortgage Reductions
'Better Finance for More Homes Sooner'
[email protected]

 

[twodogs]

We are looking at rent, as buying on Sydney north shore will use up too much cash and cash flow that should be used for more profitable investing. Also, paying 2% rent to another investor is a great deal for the tennant. Who wins in the long run ? Dunno. I found this freeware program in the internet, it's quite interesting.

http://members.ozemail.com.au/~wgarland/

Has anyone got an better calculators ?

 

[DanielB]

Hi Julie,
Your scenario that you described is sound. The only point where the ATO might quibble is the duration of your residence in your PPOR. 6 months sounds a bit short to me. Geoff indicated a duration of 12 months and I think this is more likely to be acceptable to the ATO.
Also, be aware that if you buy a PPOR then later rent it out as an IP and move into another PPOR (rather than renting) that you can only have one of these properties classified as your PPOR (for tax purposes) at any point in time. ie you cannot claim a CGT exemption on your ex-PPOR if you sell after 2 years and also claim full CGT exemption on your current PPOR should you decide to later sell.

cheers
Daniel

 

[Peter 14.7]

Why buy, tax, risk, leverage?

Don't forget the benefits of CG tax free and risk (you always have a tenant if you own) and it aint going to do a HIH or One tel overnight like shares.

Peter 147

PS I got to say it as well. How many really save every dollar they save by renting over buying on pure investments. Don't forget human nature as I leave to go shoppping!

 

[Peter Parker]

Don't forget the benefits of CG tax free and risk (you always have a tenant if you own) and it aint going to do a HIH or One tel overnight like shares.

Peter 147

PS I got to say it as well. How many really save every dollar they save by renting over buying on pure investments. Don't forget human nature as I leave to go shoppping!

Well nearly every ; )

But it's easy to justify the big travel bills when they're to buy IPs!

I'm firmly in the 'Rent PPOR + buy IPs' school. I'm happy for someone else to worry about their heavy neg gearing while I pay them <4% rent while collecting 8-9% for IPs.

My choice was basically:

1. Buy PPOR in Melb (for the cost of 3 IPs) and probably not get finance (an 80% loan would be close to 8 times my annual income!), slash current savings program.
2. Buy cheap PPOR further out Melb, commute to work, slash savings program.
3. Keep renting in excellent location, keep walking to work (8 min), buy IPs, double income (rents + job) and have no finance approval difficulties.
4. Keep renting and invest surplus in shares, managed funds, etc.

Not surprisingly, a mixture of 3 & 4 has been most attractive to me.

Peter

 

[np2003]

There seems to be a lot of Hermet crabs on this forum

If you have a small home business, renting is a good way to reduce some tax, however if you use it as a PPOR, I believe you can still get tax deductions on the loan interest.

The only downside to renting is you can't really do your own renovations which a lot of home owners love. The other factor is whether or not you have a decent landlord. When we renteded our landlord was pretty selfish. We had lived in a house over 5 years, the carpets would of been over 9/10 years. We asked them to replace it and they would simply keep delaying things until we got fed up and moved. Of course I could of bought new carpet, but why would anyone spend $5000 to replace the carpets on a house which you don't own. Being able to build a patio or adding some features to your own house gives owners comfort.

 

[Peter 14.7]

Well nearly every ; )

But it's easy to justify the big travel bills when they're to buy IPs!

I'm firmly in the 'Rent PPOR + buy IPs' school. I'm happy for someone else to worry about their heavy neg gearing while I pay them <4% rent while collecting 8-9% for IPs.

My choice was basically:

1. Buy PPOR in Melb (for the cost of 3 IPs) and probably not get finance (an 80% loan would be close to 8 times my annual income!), slash current savings program.
2. Buy cheap PPOR further out Melb, commute to work, slash savings program.
3. Keep renting in excellent location, keep walking to work (8 min), buy IPs, double income (rents + job) and have no finance approval difficulties.
4. Keep renting and invest surplus in shares, managed funds, etc.

Not surprisingly, a mixture of 3 & 4 has been most attractive to me.

Peter

Hi Spiderman

You put a good case of increased $$ from work versus costs of being in the burbs/bush. I also have always lived next to my work because I like to sleep in using the savings of $40 a week or so on transport to offset the additional repayments.

What I have noticed is a mindset different to myself that I would rather live in anything provided I owned it, over renting a little bit of luxury.

Now of course at 37 home ain't a hovel anymore and my wife still remembers (with a shudder) one home she called the "Sh*tbox". Being 37 I am just Gen X but more a Boomer by nature it seems.

Thanks for the insight and I'm sure doing the figures your strategy is right, plus sooner or later one of the IP becomes your home I assume.

Peter 147

 

[Aceyducey]

The only downside to renting is you can't really do your own renovations which a lot of home owners love. The other factor is whether or not you have a decent landlord. When we renteded our landlord was pretty selfish.

If you're a reliable long-term renter with a good landlord you'd be surprised what is possible.

One of the strategies we, and others, have employed with our tenants is to say - why don't we buy the paint & you do the repainting.

Cheaper way for the landlord to get renovations done, binds the tenant a bit closer to the property (who's going to leave just after they've painted 'their' house).

I don't see why a tenant can't approach the landlord & say - I'd like these improvements made & this is how I'll help reduce the cost of them....and even show comps to prove the increase in value of the property that's likely to result.

Take the initiative, don't wait for someone else to take it for your benefit

Cheers,

Aceyducey

 

[Jas]

Re renting from our trust.

This has been explained in many a post. We got the information from Dale.

However, as he's still away, heres a quick low down. There are advantages to owning your PPOR and renting your PPOR. By renting from your trust, you get both.

Be renting from your own trust you have all the advantages of renting a nice property at a lower price than you could buy it for, you can apply for rental assitance from the governemtn, you can rent a partially furnished or fully funrished home.
Also, if you sign a long term lease, you can gain the CGT tax reduction as you are considered to have an 'interest' in the property.
Finially, you can get rent reducations becuase you aren't using a property manager, you'll do your own repairs, your landlord won't need landlord's insurance, ect, ect.

If you buy a house and then claim for your home office, you have CGT issues but renting and then claimning for an office, you don't.

If someone sues you, your assets are protected - you don't even own the furntirue of the house you live in...

From the landlord's POV, you own a nice apprecating asset, you can claim tax dedjuctions for hte nevative gearing, and deprectaion on the furniture you provide. More deductions on running hte house too.

The key to looking at this is to look at it from an accoutant perspective. There are two different entities involved - the trust and you.
If you rented from Bob Jones' Family trust, all of the above would apply.

the fact you are a benerfeicy of Bob Jones' Family trust means nothing. It and you are seperate enitites.

Of couse, this is just the quick and dirty explanation. Talk to your accountant about how you need to set it up and run it.

Jas

 

[johnnyb]

Jas,

From the ATO's perspective I thought you could only do all of this if you can demonstrate that you will be moving on (in the not too distant future) so that the property will be rented to a "non-related" party. If you plan to live there for the long term won't you run into problems?

John.

 

[Aceyducey]

From the ATO's perspective I thought you could only do all of this if you can demonstrate that you will be moving on (in the not too distant future) so that the property will be rented to a "non-related" party. If you plan to live there for the long term won't you run into problems?

Nope - not unless the laws are changed

Speak to a good accountant!

Cheers,

Aceyducey

 

[Kristine..]

The only downside to renting is you can't really do your own renovations which a lot of home owners love. The other factor is whether or not you have a decent landlord. When we renteded our landlord was pretty selfish. We had lived in a house over 5 years, the carpets would of been over 9/10 years. We asked them to replace it and they would simply keep delaying things until we got fed up and moved. Of course I could of bought new carpet, but why would anyone spend $5000 to replace the carpets on a house which you don't own. Being able to build a patio or adding some features to your own house gives owners comfort.

Well I must be doing something right as a landlord:

I recently installed whole of house evaporative cooling because the tenants said they felt the heat in summer, and today the pm rang to say other tenants wanted to install a few things at their cost and would I mind, and No. 1 Son's incoming tenants have asked for all the optional extras (we supplied a list of options to the pm which he gave to all enquiries so they could customise how they wanted the house to be) which means he will be earning 30% return on the cost of the improvements (a gross of nearly 6% per annum in an area with more than 80 available rentals on the web with the average return of 4.2% pa)

As people expect a higher standard of rental accommodation I can see that there will be more flexibility in the 'can we do it if we pay for it' field, not just 'would you mind if we install an extra phone line'.

Mind you, one of our regular forum contributors was surprised when the body corp manager contacted her to request that the air conditioning ductwork be painted in the same colour as the building trims. 'What air conditioning??'

Getting back to the original theme: I really wouldn't mind treating myself to a year or so at Docklands, but I guess a short term rental like that would feel more like a holiday than a home. Ah well, Jakk must be just about to settle on his apartment with a view, better start squashing avocados in preparation for the houswarming party!!

cheers

Kristine

PS we live in our 'own' home (I have moved 22 times) and are delighted to provide homes for other people, too!!

 

[Starting out]

Renting from trusts

Jas how long do you live in your house for before moving on?
I asked my accountant a few months ago about this and he said only about 1/10 claims go through successfully. This info stopped us from going ahead with it.
Cheers
Starting out

 

[Aceyducey]

Jas how long do you live in your house for before moving on?
I asked my accountant a few months ago about this and he said only about 1/10 claims go through successfully. This info stopped us from going ahead with it.

Starting Out,

I'm not aware of a minimum length required for this to be legal - it's more about arm's length transaction & the interest in the property requires long-term agreements as Jas stated.

What's this 1/10th of claims you're referring to? What type of claims? Rental assistance?

I suggest you seek a second opinion from another accountant.

Cheers,

Aceyducey

 

[LisaS]

Trust Structure

Hey Acey & Jas,

I would be interested in finding out what sort of trust structure you use, and how long each of you has been living in the one property rented from your trust.

Cheers
Lisa

 

[Jas]

Jas how long do you live in your house for before moving on?
I asked my accountant a few months ago about this and he said only about 1/10 claims go through successfully. This info stopped us from going ahead with it.
Cheers
Starting out

We don't live in it to move on. We have a long term lease.

Perhaps the reason your accoutant was talking about short term was to help prove you are not doing it for tax reasons.

I am doing it to protect my assests, so I have a commerically valid reason.

We have a rental assessment from a couple of real estate agents, and the rent is based on that - so we are paying market rent.
We have a lease, so nothing is hidden.

One of the forum accountants can explain this in more detail.

Jas

 

[Jas]

Hey Acey & Jas,

I would be interested in finding out what sort of trust structure you use, and how long each of you has been living in the one property rented from your trust.

Cheers
Lisa

We have a standard family discentonry trust.

We moved down to canberra a year ago.

Jas

 

[Aceyducey]

We moved down to canberra a year ago.

Oh and we live in the same house Lisa

Cheers,

Aceyducey

 

[geoffw]

Oh and we live in the same house Lisa

Cheers,

Aceyducey

That reminds me of a Groucho Marx line. He was working on his front garden, when someone asked him if he got paid much for gardening.

He said, "Not much, but I get to sleep with the lady of the house".

 

[Jas]

cute

Jas